NAB warns on Facebook, Apple banking threat

Technology giants with investment budgets that dwarf those of Australia's banks are expanding into financial services, and likely to represent a growing competitive threat to the industry, National Australia Bank warns.

NAB's chief operating officer, Antony Cahill, on Thursday highlighted the future wave of competition banks may face from the technology sector, as he appeared before the Productivity Commission's inquiry into competition in finance.

Mr Cahill said that on top of the "truly intense" competition banks currently faced, lenders were "acutely aware" of the growth and emergence of new rivals. These potential rivals included financial technology or "fintech" firms, and the likes of Apple and Facebook.

He cited KPMG figures showing a five-fold increase in the number of Australian fintech firms in recent years, from less than 100 in 2014, to 579 last year.

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"While we do look for opportunities to work with start-ups, fintechs and emerging technologies, where there are opportunities to create new experiences for customers, we are acutely aware the majority of these new players will likely act as direct competitors," Mr Cahill said.

"We are also seeing the global tech giants, such as Apple and Facebook, continuing to move into financial services, particularly within the payments environment through services such as Apple Cash and Facebook Messenger."

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"These tech giants are truly global businesses; they are many times larger than any Australian bank and have multibillion-dollar budgets which dwarf the investment capacity of any Australian company."

Banks have in recent days been making their arguments to the Productivity Commission that competition in banking is indeed fierce, after the Commission's draft report last month found competition in the sector had eased, in part because regulators put too much emphasis on stability.

CBA's chief financial officer, Rob Jesudason, said that in the last 12 months, major banks had lost market share to regional lenders and non-banks in mortgages, and competition was heating up across other products as well.

"If you look at the major banks across some of the key products, including Commonwealth Bank, we have been losing share," he said. "The point we would make quite strongly is competition is alive and kicking."

Its key response to the competition was to invest in technology and the customers' experience, he said.

Mr Cahill also said all of the big four banks were growing their mortgage portfolios slower than the wider market, amid "very significant" discounting for new home loan customers.

"Is it price competitive? Absolutely. We're seeing that play out at the moment in terms of the rates that are available to borrowers, and secondly where the growth is actually occurring," Mr Cahill said.

However, the commissioners conducting the inquiry, Peter Harris and Stephen King, appeared sceptical about how significant the big four's market share losses were. Dr King said that to create a bank as big with the assets of ANZ or NAB would require adding together "everybody from Macquarie on down, outside the big four".